Agilo Ltd v Henry

A defective statutory demand is not automatically set aside. Where a document can sensibly be regarded as a statutory demand, the court considers all the circumstances and asks whether allowing it to stand would be unjust. However, a demand served by, or on behalf of, a person who is not the creditor will normally be set aside because it cannot found a bankruptcy petition. The same approach applies where there is a genuine dispute about whether the demand was served on behalf of the creditor. The absence of prejudice does not cure the failure to serve a demand by or on behalf of the person entitled to petition.

Agilo Ltd appealed against orders made by District Judges Parker and Davidson in Slough County Court setting aside statutory demands served on Mark Henry and William Henry. The demands arose from personal guarantees relating to a loan made to Lancsville Construction Limited. The documents identified Agilo Limited as the creditor, although the loan had been made by Agilo Master Fund Limited, with Agilo acting as its delegate investment manager.

The appeals raised whether Agilo was entitled to enforce the guarantees, whether Master Fund had served the demands, and whether any defect was merely technical and caused no prejudice. The undue influence issue concerning William Henry was not argued before the court.

1. The appeals were dismissed. The orders setting aside the statutory demands were upheld.

2. Under Insolvency Act 1986, a bankruptcy petition may be presented only by a creditor to whom the relevant debt is owed. A statutory demand is part of the mechanism by which inability to pay may be established. The statutory demand rules therefore require attention to the identity of the person entitled to petition.

3. Following In re A Debtor (No. 1 of 1987) [1998] 1 W.L.R. 271, a document which can sensibly be regarded as a statutory demand is not necessarily set aside for a defect. The court exercises its discretion under rule 6.5(4)(d) having regard to all the circumstances, particularly whether it would be unjust for the demand to produce its statutory consequences.

4. A distinction must be drawn between a defective statutory demand and the absence of a statutory demand. A demand served by or on behalf of someone other than the creditor is, in substance, no statutory demand by the creditor. Following Coulter v Chief Constable of Dorset Police [2005] 1 W.L.R. 130, such a demand will normally be set aside because no bankruptcy petition can properly be presented on its basis. The same normally follows where there is a genuine dispute about whether the demand was served on behalf of the creditor.

5. Master Fund, rather than Agilo, had made the loan and was at least at first sight the creditor entitled to petition. The demands unequivocally identified Agilo as the creditor. Their particulars merely recited the contractual arrangements and did not establish service on behalf of Master Fund.

6. There was at least real scope for argument that Agilo was not entitled to enforce the guarantees. The guarantees did not clearly confer enforcement rights on Agilo, and the fact that Agilo’s address was used for notices was insufficient. The resulting substantial dispute justified setting aside the demands, notwithstanding the absence of prejudice.

7. The court declined to determine undue influence. It had not been argued and future evidence might differ. The question of costs relating to Mark Henry’s cross-appeal was reserved for further argument.

1. High Court (Chancery Division): Appeals from orders setting aside statutory demands were dismissed.
2. Slough County Court: District Judge Parker set aside the statutory demand concerning Mark Henry on 4 June 2010. District Judge Davidson set aside the statutory demand concerning William Henry on 7 June 2010.